Chile trade zone turns small town into booming city

Not long ago, this port town in northern Chile was best known for the major road that cut across the runway of its downtown airport, forcing a halt in vehicle traffic when planes landed or took off. These days Iquique is better known as Chile's most economically vibrant city. Thanks to its designation in 1975 as a ``free-trade zone,'' this desert town with few natural resources has been expanding rapidly, with dozens of multinational corporations establishing operations here, including Coca-Cola and Kodak.

This has brought a horde of new residents, with Iquique's population over the past 12 years nearly doubling, to 135,000. Unemployment over this time, however, has fallen from 15 percent to 7 percent, even though the jobless rate in the rest of Chile has risen.

Companies come to Iquique to take advantage of the free-trade zone's benefits: They can import goods tariff-free and are exempt from local value-added and excise taxes. And when companies either ship goods via Iquique to other countries where they will be manufactured or assemble goods here for reexport, they face minimal restrictions and paper work.

``The free-trade zone was a key reason we put our factories here,'' says Ra'ul Montecino, a spokesman for Industrias Cardoen, a Chilean company that exports weapons and is Iquique's largest employer, with 600 workers. ``We're able to import goods without paying tariffs, and it's very easy to export.''

The theory behind free-trade zones is just that: to attract industry by eliminating tariffs and taxes and by minimizing government red tape. No free-trade zone in Latin America seems to have done this better than Iquique's. According to officials at Zofri, the state company that administers Iquique's free-trade zone, the only free-trade zone in Latin America that does more business than Iquique's is in Col'on, Panama.

But Colon's has existed nearly 30 years longer than Iquique's, which will do more than $1 billion in business in 1987, up from $850 million last year. Colombia has free-trade zones in the port cities of Baranquilla, Santa Marta, Cucuta, and Cartagena. Venezuela has one on Margarita Island, and Brazil has one at Manaus, on the Amazon River.

Iquique's free-trade zone has been successful because it provides easy access to neighboring countries and because it has been well administered. About half of the $500 million in goods that have come through Iquique's port so far this year have been transported to Bolivia, Peru, Argentina, and Paraguay, where they are then manufactured and sold.

For landlocked Bolivia, importing goods via Iquique is usually cheaper and faster than through ports in surrounding countries. Goods often arrive much quicker in Peru, Argentina, and Paraguay via Iquique than through their own ports, because the Chilean entry requires little paper work.

Gobind Daswani, who established an import-export firm here seven years ago, says it takes four days to send goods to Asunci'on, Paraguay, after they've arrived in Iquique, compared with one month from Sao Paulo, Brazil, which is half the distance from Asunci'on.

``Goods can be shipped the same day that they arrive,'' says Mr. Daswani, who has seen sales triple this year to $5 million. ``You fill out the customs forms before the boat docks. And you don't have to pay off someone here as you often have to do in other countries.

``There's too much bureaucracy in other countries,'' he adds. ``Here, you bring in anything from anywhere.''

While most companies have used Iquique only as a port of entry before exporting goods to other countries, the trend now is to assemble goods here. Coca-Cola will construct a bottling plant here next year and plans to ship soft drinks to Bolivia and southern Peru, according to Juan Morales, Zofri's director of foreign trade.

To get around quotas on goods from Asian countries, a South Korean company called Hogafetex ships yarn to Iquique, where 74 workers turn it into sweaters that are sold in the United States under the Castenovo label.

The free-trade zone has given new life to Iquique, which is 1,100 miles north of Santiago. The downtown airport was closed several years ago and replaced by a modern one 25 miles away. Today, more than 120 companies are building warehouses for their goods, and dozens of others are constructing small assembly plants.